Trade Practices Amendment (Small Business Protection) Bill 2007

Bills Digest no. 47 2007–08

Trade Practices Amendment (Small Business Protection)
Bill 2007

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

To allow the Australian Competition and
Consumer Commission (ACCC) to bring representative actions on
behalf of people damaged by conduct determined to be in breach of
the secondary boycott provisions (section 45D and section 45E) in
the Trade Practices Act 1974.

Background

The reader should note that the Bill
essentially replicates a 2002 Bill of the same name. This Digest
therefore draws heavily on the Trade Practices Amendment (Small
Business Protection) Bill 2002,
Bills Digest, No. 134 2001 02.

Section 87 of the Trade Practices Act
1974 (TPA) permits the ACCC to bring a representative action
seeking compensation and other remedies on behalf of people who
have suffered, or are likely to suffer loss or damage as a result
of another person s contravention of specified provisions of the
TPA. A person covered by a representative action must consent to
ACCC commencing proceedings.

While the ACCC may bring such actions in
relation to breaches of the whole of Part IVA (unconscionable
conduct), Part IVB (industry codes), Part V and Part VC (consumer
protection), a representative action in relation to Part IV
(restrictive trade practices) may not be commenced if the matter
involves contraventions of the boycott provisions in sections 45D
and 45E of the TPA.

Section 45D prohibits two people from acting
in concert to hinder or prevent a third person from supplying goods
or services to, or acquiring goods or services from, a fourth
person (the target) who is not an employer of the first person or
the second person. To breach the section, the conduct must have
been engaged in for the purpose, and would likely have the effect,
of causing substantial loss or damage to the business of the
target. Section 45E prohibits a person making an agreement with a
union for the purposes of preventing or hindering trade between
that person and a targeted entity.

This Bill is the fifth occasion that the
Government has sought to enable the ACCC to bring representative
actions for contraventions of sections 45D and 45E.

The first attempt was in the Trade Practices
Amendment (Country of Origin Representations) Bill 1998. A schedule
to this Bill sought to empower the ACCC to generally bring
representative actions for breaches of Part IV of the TPA. The Bill
was debated against the backdrop of the waterfront dispute.
[1] At the time the
Opposition expressed concern about the ACCC gaining the ability to
conduct (retrospective) secondary boycott actions on behalf of
businesses against trade unions. In the end, the Senate omitted the
representative action provision from the Bill.

During the waterfront dispute, the ACCC sought
to overcome its lack of capacity to commence representative actions
in relation to section 45D by seeking findings of fact from the
Court. At the time the then ACCC Chairman, Professor Fels, stated
that the intention was to open open up the possibility for
importers to pursue the Maritime Union by lowering their evidential
burden. [2]

The Government revived the issue in the Trade
Practices Amendment Bill (No.1) 2000. On this occasion the Senate
rejected the proposal to allow the ACCC to bring representative
actions for all of Part IV and carved out actions in relation to
sections 45D and 45E. The Government reluctantly accepted the
compromise in order to secure the passage of the remainder of the
Bill. As a result of these amendments the ACCC can bring
representative actions in relation to boycott conduct which
substantially lessens competition or affects international trade
[3] but not where the
conduct causes substantial loss or damage to a targeted person.
[4]

In August 2001, the Government sought to
remove the remaining limitation through the Workplace Relations and
Other Legislation Amendment (Small Business and Other Measures)
Bill 2001. The Bill was not debated before the Parliament was
prorogued for the General Election.

The last attempt was the Trade Practices
Amendment (Small Business Protection) Bill 2002. Essentially
replicating the provisions in the existing Bill, the 2002 Bill was
rejected by the Senate on two occasions prior to the last
election.

The proposition that the ACCC should have the
capacity to initiate representative actions in relation to breaches
of Part IV has been endorsed by the Australian Law Reform
Commission (ALRC), [5] the House of Representatives Standing Committee on
Industry Science and Technology (the Reid Committee) [6] and the Joint Select
Committee on the Retailing Sector (the Baird Committee). [7]

The ALRC put the case for representative
actions in the following terms:

Representative actions remove many of the
financial barriers which ordinary people face when seeking to
enforce their legal rights, give the courts a more efficient
process for dealing with cases involving large numbers of people
and help to ensure that laws are enforced more efficiently and more
often. [8]

It is important to note, however, that none of
these reviews considered the implications of the proposal from an
industrial relations perspective. The Reid and Baird Committees
recommended the measure in the context of debate about improving
small businesses access to a remedy under the misuse of market
power provisions in section 46. Furthermore, at the time the ALRC
made its recommendation, the equivalent of the current section 45D
was located in the Industrial Relations Act 1988. Under
that legislation, enforcement proceedings in relation to the
boycott provisions could not be commenced unless the Australian
Industrial Relations Commission (AIRC) first had the opportunity to
resolve the matter by conciliation. [9]

The question of whether representative actions
should be supported inevitably involves an assessment of the merit
of the sections 45D and 45E. The proposal in this Bill has been
contentious in the past because these provisions are arguably
politically sensitive and raise questions about the competition
regulator being involved in essentially industrial disputes.
However with the current Bill, the debate about sections 45D and
45E has been less contentious in this regard. While the ACTU and
the Australian Greens have continued to lobby that the appropriate
regulatory regime for trade union activity is the workplace
relations regime and not the competition laws, the Australian Labor
Party has recently announced that under a Labor government the
existing secondary boycott provisions would be retained. [10] Rather than being a
great ideological shift, this may be a practical realisation that
secondary boycotts are no longer such a significant feature of
industrial activity. [11]

The Bill was introduced into the House of
Representatives on 15 August 2007 and the provisions of the Bill
were referred to the Senate Standing Committee on Economics for
inquiry and
report by 5 September 2007. In its report, [12] the Committee argued that the
Bill is a logical step in the development of the TPA s protection
of small business from illegal secondary boycott activity and
therefore recommended that the Bill be passed. The Digest draws on
both the Committee report and submissions to the inquiry.

The Senate Committee report into the Bill
states that over the past decade, the ACCC has initiated twelve
Federal Court proceedings based on sections 45D and 45E of the TPA.
All cases bar one involved allegations that a union or a company
acting in concert with a union had hindered or prevented the supply
of goods or services by a third party. For these eleven cases, the
ACCC gained either an injunction or a financial penalty against the
union or unions. [13] Appendix 3 of the report contains further detail on
these cases.

The Senate Committee report however further
notes that few secondary boycott allegations actually reach the
Federal Court. It states:

In the period 1 July 2004 to 30 June 2007, the
ACCC received a total of 36 complaints on secondary boycott
matters. In only two of these was there sufficient evidence to
undertake litigation in the Federal Court. In 14 of the 36
complaints, the ACCC found there was insufficient evidence; in 10
of the complaints, it found there had been no breach of the TPA.
[14]

In his second reading speech, the Hon Peter
Costello MP indicated that the focus of the Bill is to provide
Australian small business with access to the ACCC s expertise and
resources in seeking damages for unlawful secondary boycotts. A key
question to be asked therefore, is whether the Bill will be
effective in providing this protection for small business.

Professor Frank Zumbo, Associate Professor
from the School of Business Law and Taxation, University of New
South Wales, in his submission to the Senate Committee inquiry,
argued that ACCC representative actions are very expensive and
cumbersome and as a result, the Commission has tended not to bring
actions in the past. The submission states:

The Bill does no more than to seek to provide
for the theoretical possibility that the ACCC may consider bringing
a representative action on behalf of those private parties who may
have suffered loss or damage from breaches of the secondary boycott
provisions of the Trade Practices Act. In practice, however, the
ACCC almost never brings representative actions. A search of trade
practices cases reveal that less than a handful of representative
actions have been taken by the ACCC and none of the cases found
relate to breaches of the competition law provisions [ ] [15]

Professor Zumbo claimed that given the ACCC s
track record it is unlikely that the Bill will lead the ACCC to
bring representative actions in relation to secondary boycotts. The
Bill would therefore be of no benefit to consumers, small
businesses and farmers. The issue is one of scarce public money to
fund private litigation, rather than the presence of a law that
enables the Commission to bring this representative action.

Accordingly, the submission suggested
broadening legal access for parties claiming damages from secondary
boycotts. Currently, private losses can only be recovered through
the Federal Court under section 83 of the TPA. The submission
claimed that the cost of private parties recovering their losses
would be reduced if the Act was amended to allow access to the
Federal Magistrates Court. It emphasised that this would be a
simple legislative change to section 86(1A) and would empower small
businesses to recover losses 'in a timely and cost effective
manner'. [16]

The Senate Committee put Professor Zumbo s
proposal to Mr Steven of the Council of Small Business
Organisations of Australia Ltd (COSBOA). Mr Steven responded in
writing stating:

COSBOA feels the ACCC should be given the right
to take representative action in respect of Section 45 (D) and (E)
and then also be strongly encouraged to be much more proactive.
Plus we feel the Federal Magistrates Court option could be
available to private litigants as an easier and cheaper option in
order to ensure justice. [17]

The Senate Committee agreed with COSBOA that
the most effective remedy for small businesses is through the ACCC.
From the Committee's perspective, the key issue is that the ACCC's
representative resources will stretch further than those of small
business, regardless of the court before which the matter is heard.
[18]

The strongest lobby of concern relates to the
Bill s possible detrimental impact on freedom of speech.

The Senate Committee inquiry received several
submissions from animal welfare organisations [19] expressing concern that the
Bill's measures would enable the ACCC to bring legal action against
citizens and interest groups lobbying against the production and
sale of products and services. [20] These animal welfare concerns were triggered by
comments made by the Treasurer, the Hon. Peter Costello in February
2007 when he foreshadowed the Bill's introduction. Mr Costello
stated:

The Government is going to amend the Trade
Practices Act so that the Australian Competition and Consumer
Commission can take representative actions that it can take an
action on behalf of all Australian farmers if somebody tries to
boycott their wool. An example of this has recently been the group
which is trying to organise a boycott of Australian wool because it
is protesting about mulesing. That of course would affect all
Australian farmers. We are going to amend the law so that the ACCC
can bring legal action on behalf of all Australian farmers against
those that are trying to boycott their wool and boycott their wool
on these spurious grounds. Mulesing is something that is done
because otherwise sheep could suffer flystrike which would be more
painful, which would be more exploitative, and to empower the ACCC
to look after Australia s farmers against these groups is a benefit
to all wool growers in Australia. [21]

The Treasurer's comments were in reference to
the US-based People for the Ethical Treatment of Animals (PETA),
which had campaigned for international clothing companies to ban
the use of Australian wool over the practice of mulesing. [22]

Several of the animal welfare groups and
consumer groups suggested that the Bill should contain a provision
exempting public interest campaigning from the section 45D and 45E
secondary boycott provisions.

The Committee, while acknowledging the
concerns of animal welfare groups, argued that on the basis of the
evidence available, these fears were unfounded. The report
states:

The bill is solely concerned with empowering the
ACCC to take representative action on behalf of parties who have
sustained damages from a secondary boycott. Unless animal rights
groups or other advocacy groups not specifically exempted in the
legislation directly hinder or prevent the supply of goods or
services, their right to lawfully protest remains fully protected.
[23]

As noted above, this Bill is the fifth
occasion since 1996 that the Government has sought to enable the
ACCC to bring representative actions for contraventions of sections
45D and 45E. On all previous occasions the Australian Labor Party
had opposed the legislation, generally taking the view that the
secondary boycott provisions in the TPA are an anomaly and that it
is more appropriate that they be dealt with in the workplace
relations regime.

However, Shadow Minister for Industrial
Relations, Julia Gillard, MP, has recently announced that under a
Labor government the existing secondary boycott provisions would be
retained. [24]
Labor spokesperson on competition, Chris Bowen, MP, has been
reported as saying that while the Bill is of questionable value and
would be unlikely to lead to many prosecutions, it is however the
logical step once you accept that the secondary boycott provisions
should remain in the TPA. [25] Labor Senators on the recent Senate Committee inquiry
into the Bill also supported the Coalition in recommending that the
Bill be passed.

The Australian Democrats support the Bill,
although in supplementary remarks in the Senate Committee report,
Senator Andrew Murray made several recommendations for
amendment.

In relation to the possibility of the
provisions being used to limit freedom of speech, Senator Andrew
Murray was critical of Treasurer Costello s inference that the
provisions could be used to stop protest action against mulesing.
Senator Murray states:

Because this matter has now been distorted by
the Treasurer s comments, the precautionary principle requires
amendments or a legislative note to make it crystal clear that
section 45 has not changed in character and does not inhibit people
s freedom of expression or association, whether that is by way of
boycotting certain products as a form of protest, or physically
protesting about them. [26]

In relation to representative action for small
business, Senator Murray noted that the wording of the legislation
does not reflect the argument that the Bill will benefit small
business. As a precaution, the Senator recommended that the Bill be
amended so that the representative action be available only for
small business and individuals; and that a small business be
defined as one with a $5 million asset base or one that employs
less than 20 people. [27]

Senator Murray also thought that the Bill as
it stands will not be of great benefit. Like Professor Frank Zumbo,
the Senator argued that it would be of much greater use to extend
the jurisdiction of the Federal Magistrates Court to enable it to
deal with both actions for breach and damages in relation to
secondary boycotts, [28] thus providing private litigants an easier and cheaper
option.

The Australian Greens do not support the Bill.
Senator Rachel Siewart, in the dissenting report on the Bill,
stated:

We oppose the secondary boycott provisions in the Trade
Practices Act and as such cannot support the creation of new means
for persons to access redress for breaches of those provisions.[ ]
In general, we support representative actions, however, we do not
believe it is the proper role of the ACCC to take action of the
nature facilitated by the proposed amendments.

The Trade Practices Act and the ACCC are primarily concerned
with consumer protection and competition law. The secondary boycott
provisions in the Act are an anomaly and are primarily aimed at the
activities of trade unions and their members. We agree with the
ACTU when they say that:

the appropriate regulatory regime for trade
union activity is the workplace relations regime, not the
competition laws. The Australian Industrial Relations Commission
(AIRC) is the appropriate specialist regulator. Importantly its
approach to industrial disputation has traditionally involved
resolution of the underlying dispute whilst preserving the ongoing
relationship between industrial parties.

We also note the comments of the AMWU [29] that the International Labor
Organisation has found the secondary boycott provisions
inconsistent with Australia s obligations in relation to freedom of
association. The AMWU also notes that the Senate has on numerous
occasions in the past refused to pass Bills that have sought to
enable the ACCC to pursue representative actions for contravention
of section 45D and 45E.

It is even more worrying for the Greens that the
Treasurer advocates for these amendments citing the activities of
animal welfare activists. The explicitly stated intention on the
part of the Treasurer that these provisions should be used against
citizen activists protesting what they believe to be unethical or
immoral practices is of great concern. [30]

Existing subsection 87(1A) in the TPA empowers
the Federal Court to make remedial orders, including compensation
orders, for the benefit of people identified in an application made
by the ACCC. Subsection 87(1B) deals with the conditions under
which the ACCC may make an application to the Court under
subsection 87(1A). Currently such applications may not be made on
behalf of people who have, or are likely to suffer loss or damage
by conduct which breaches sections 45D or 45E.

Item 1 deletes the reference
to sections 45D and 45E in paragraph 87(1A)(b). It would enable the
Court to make orders in relation to an application brought by the
ACCC concerning any conduct in breach of Part IV.

Item 2 deletes the reference
to sections 45D and 45E in paragraph 87(1B)(a). It would permit the
ACCC to make an application to the Court for an order on behalf one
or more people damaged by any conduct in breach of Part IV.

These amendments do not have retrospective
effect. The ACCC will only be able to bring a representative action
in relation to conduct in breach of sections 45D and 45E that
occurs after this legislation has received Royal Assent
(item 3).

Concluding comments

The title of the Bill and the Minister s
second reading speech indicate that the focus of the measure is to
protect small business. During previous debates on proposals to
enhance the ACCC s power to bring representative actions, the
Commission has also committed itself to using such powers to assist
the small business sector.

Nevertheless, the Bill contains no definition
of small business and does not limit the ACCC to a particular class
of business in bringing representative actions. If the Bill is
enacted, the ACCC will be empowered to bring representative actions
on behalf of any person who has suffered loss or damage as a result
of the contravention of sections 45D or 45E. The Australian Council
of Trade Unions in its submission to the Senate Committee inquiry
argued that the effect of the Bill would be to empower the ACCC to
use taxpayer funds to pursue a trade union for damages on behalf of
large corporations. [31]

It has been suggested that if Parliament is
concerned that large businesses could potentially benefit from ACCC
representative actions, it may consider the option of inserting a
definition of small business and restricting the capacity of the
ACCC to initiating actions on behalf of such entities. Senator
Murray has suggested that the definition could be a business with
no more that a $5 million asset base or alternatively a business
with less than 20 employees. [32]

[6]. House of
Representatives Standing Committee on Industry, Science and
Technology, Finding a balance: towards fair trading inAustralia, May 1997, p. 133. While endorsing the
proposal to permit representative actions under Part IV of the TPA,
the Reid Committee cautioned that the measure would marginally
improve small business access to justice .

[7]. Joint Select
Committee on the Retailing sector, Fair Market or Market
Failure? A Review of the Australian Retailing Sector, August
1999.

[10]. See below
under the heading ALP/Australian Greens/Democrats policy position
.

[11]. Chris Bowen,
Labor spokesperson on competition, has been reported as saying
"Secondary boycotts were largely a weapon of the '70s and 80s,
in Steven Scott, Support for Costello s Bill ,
Australian Financial Review, 30 August 2007, p. 8.

[19]. These included the Management Committee
of Animal Liberal Incorporated South Australia, Voiceless, the New
South Wales Young Lawyers Animal Rights Committee, the Consumer
Action Law Centre, the Wilderness Society, the Australian Wildlife
Protection Council Incorporated and Animal Liberation ACT.

[22] . ibid., paragraph 3.15. The Senate Committee report provides
the following background on this case: In2005, the not-for-profit company Australian Wool
Innovation (AWI) filed a lawsuit in the Federal Court against PETA.
AWI insisted it would continue its case unless PETA agreed to stop
the boycotting campaign. In June2007, the
parties reached a compromise. The Australian wool industry won a
commitment from PETA to stop its protest until31 December
2010; the industry agreed to invest in developing genetic
alternatives to mulesing with a view to phasing out the practice by
the end of 2010.

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